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Background
The years 2008 and 2009 saw the United Arab Emirates experience an economic crisis. The particular emirate that was affected most by the crisis was Dubai (Ahmad and Al, 2010). Privately owned projects that were initiated in Dubai were cancelled while others were put to hold. The withdrawal of the private and foreign investors was a result of the financial strain that was being experienced globally. This withdrawal was detrimental to Dubai’s economic growth. The debt crisis of United Arab Emirates has also had a toll on the economy of Dubai. With little oil resources of its own, the international market lost hope in the emirate’s ability to contribute in offsetting the debt. There has therefore been a need to rescue Dubai from its economic constraints (Ahmad and Al, 2010).
The government then introduced a diversification program that was aimed at salvaging Dubai’s economic crisis (Ahmad and Al, 2010). The concentration of the program was to reduce the contribution of sectors related to oil in United Arab Emirate’s economy. The implication of this measure was to develop other sectors like trading, tourism and the technological firms. One of the strategies under the diversification program was the free zone strategy that was applied in Dubai and other emirates. This trading policy encouraged foreign investments in the region due to liberal trading policies. The policies decrease the amount of red tape applied by the UAE. This paper investigates the influence of the free zones on the economy of Dubai. It specifically shows the changes in the region’s GDP in the years 2009 to 2011.
Sample
The data that was used for the research was collected from financial reports of the UAE. These reports outline the UAE’s fiscal report from the year 2009 to 2011. The financial reporting was done by the International Monetary Fund. The data sampled describes the general population of the United Arab Emirates. Out of the seven emirates, Dubai is singled out and its population is indicated. The purpose of Dubai’s isolation is to see its contribution in the general GDP of UAE. All the data is well articulated in relation to the three fiscal years (IMF, 2011).
The GDP per capita and the real GDP is shown in the data compilation. The patterns of inflation during the three years are also shown. The purpose of this is to see the general trend in the purchasing vale of UAE’s currency. The data sampled also describes the exporting and importing patterns that UAE has experienced in the three years. The data indicates the value of the imports and exports and the growth in importation and exportation of goods in relation to previous years. The data also shows the exchange rate of the Dirham to the US Dollar (IMF, 2011).
The data also shows information on the levels of public debts. This information is represented in relation to the GDP. The data also shows the contribution of the different sectors on the economy. This is important in showing the influence of economic diversity. Some of the social indicators of a country’s economic development are unemployment and housing conditions. The data sampled shows the rates of unemployment and housing savings in the three years. The housing saving rates shows the government’s involvement in subsidizing housing costs for the citizens. The data also shows the percentages of trade freedom. This is in relation to the laws and policies that were enacted during the three-year period (IMF, 2011).
The purpose of the data is to compare the financial performances in the three fiscal years. This comparison is done while keenly observing the structural changes in the trading policies of UAE. Emphasis is laid in Arabia where Free Trading zones were introduced like the Jebel Ali Free Zone. The economic implications of the liberal policies are observed from the Per Capita GDP. In addition to this, social indicators like the housing standards and unemployment rates are also considered. This is because of the holistic dimension of economic development (Todaro, 1994).
Table with Summary of Samples
|
YEAR |
2011 |
2010 |
2009 |
|
POPULATION |
|||
| UAE Population (Million) |
5.3 |
5.2 |
4.8 |
| Dubai Population (Million) |
0.7 |
0.6 |
0.4 |
| Per Capita GDP (Billion Dollars) |
365 |
301 |
271 |
| Real GDP (%) |
+3.3 |
+3.2 |
-3.1 |
|
ECONOMIC DIVERSIFICATION |
|||
| Imports (Million Dollars) |
185,627 |
161,412 |
149,708 |
| Growth In Imports (%) |
+15.1 |
+7.9 |
-15.2 |
| Exports (Million Dollars) |
254,278 |
212,263 |
191,777 |
| Growth In Exports (%) |
+19.9 |
+10.6 |
-19.7 |
| Agriculture Sector |
0.7 |
1.2 |
2.7 |
| Industry Sector |
59.4 |
48.8 |
36.2 |
| Service Sector |
39.8 |
40.2 |
42.2 |
| Trade Freedom (%) |
82.7 |
73 |
60 |
| Exchange Rate |
3.6 |
3.6 |
3.6 |
|
INDICATORS OF ECONOMIC DEVELOPMENT |
|||
| Inflation (%) |
3.7 |
2.7 |
1.2 |
| Public Debts (%) |
16.5 |
20.5 |
23.0 |
| Unemployment Rates (%) |
12.7 |
20.0 |
22.3 |
| Housing Saving Rates (%) |
15.6 |
14.0 |
10.0 |
Methodology
Quantitative analysis will be used to investigate whether economic growth was achieved in the region. The method will involve the comparison of the figures recorded for the three fiscal years. This implies comparing the GDP per Capita of the three years and relating them to the percentages of Trade Freedom that was experienced in the region. In addition to the economic growth of the region, the economic development of the region will also be monitored. This will involve comparing the rate of growth in GDP to the rate of reduction in public debts, unemployment and poor housing conditions.
The findings of the research show that there has been a steady increase in per Capita GDP of UAE. During the last fiscal year, there was a growth of 1.4%. Growth was also evident in the previous years. The growth in per Capita GDP has been accompanied by growth in the liberty of trading policies in the region. In the three years, there has been an average of a 10% growth in the liberal policies of UAE. There has also been an increase in the economy’s dependence on industry. There has been a decline in the service and agricultural sectors. Economic growth has also been accompanied by changes in the structures of production. This is evident in the reduction of the rates of unemployment and poor housing facilities. However, this growth is negated by the rise in public debt. The last fiscal year saw a rise in the level of public by 1.5%.
It should be noted that the research has a number of weakness. One of the assumptions is that liberalization of the markets in the region played a major role in boosting the economy of the region.
Conclusion
The research proves the thesis that diversification of economies leads to an increase in per capita GDP of a state’s economy. UAE experienced a growth in its economy with the liberalization of its market. However, though economic growth is being achieved, the region is not experiencing economic development. This is evident in the region’s rise in the levels of public debt. Economic development needs economic growth that is accompanied by changes in the structures of production (Todaro, 1994).
Reference List
Todaro, M. P., & Todaro, M. P. (1994). Economic development. New York: Longman.
Ahmad, E., & Al, F. A. (2010). Fiscal reforms in the Middle East: VAT in the Gulf Cooperation Council. Cheltenham: Edward Elgar.
IMF. (2011). World economic outlook May 2011: A survey by the staff of the International Monetary Fund. Washington, DC: IMF.
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